Blogs

 

Introduction

India’s mergers and acquisitions market remained strong despite the significant chaos in 2023, compounded by global challenges such as increasing interest rates and high inflation rates, thus strengthening its attractiveness to foreign investors. This has helped India maintain its status as a top center for M&A transactions in the Asia-Pacific area. In spite of the decrease in global M&A markets, rapidly expanding India is still progressing quickly, with projected annual growth of 6% to 7%, possibly reaching 8% and higher.

Even though the number of M&A deals dropped in 2023, the first quarter of 2024 has seen an upsurge in market activity, which is a significant increase over the same period last year. Nearly half of this activity has come from midmarket players, who have used M&A to diversify and expand their businesses and open up new growth opportunities beyond their core operations.

 

Regulatory Framework and Developments

Depending on the kind of investment strategies used, India’s regulatory framework offers a variety of investment paths. The Companies Act of 2013, the Indian Contract Act of 1872, the Securities and Exchange Board of India Act of 1992, the Foreign Exchange Management Act of 1999, the Income Tax Act of 1961, the Competition Act of 2002, and the Insolvency and Bankruptcy Code of 2016 are the main statutes that regulate M&A activity. 

India’s M&A regulatory environment is always changing to meet the needs of the economy, technological advancements, and investors by facilitating a seamless acquisition process. The following lists some significant changes that have occurred over the years:

•Dematerialization of securities is required, in order to bring private company regulations into line with those of public companies, improve business efficiency, increase transparency in share transfers, and lessen legal disputes pertaining to share title, the Ministry of Corporate Affairs (MCA) obliged that all private companies (with the exception of small companies as of March 31, 2023) issue securities in dematerialized form and facilitate the dematerialization of all securities that are already in place starting on September 30, 2024.

•In an effort to speed up the Indian merger process, the Ministry of Corporate Affairs (MCA) has shortened the period of time that the central government has to approve the merger plan. It has also instituted the idea of deemed approval, which applies if objections are voiced and the central government does not act on them within 60 days.

•Significant modifications to India’s competition laws. The traditional asset-turnover matrix now includes a deal value threshold. Furthermore, a combination may now be approved in 150 days instead of 210 days, according to the Competition Commission of India (CCI). The primary legislation has been amended to reflect the CCI’s long-standing practice of evaluating the level of control using the “material influence” standard.

•Section 43A of the Information Technology Act, 2000 and its accompanying regulations pertaining to data protection in India will be superseded by the Digital Personal Data Protection Act, 2023, which will come into effect on August 11, 2023. It will also affect M&A activities where obtaining new consent from people whose data is being shared in connection with a transaction would be necessary.

 

Conclusion

India is still one of the major actors in the world economy, and by 2025, its GDP is predicted to reach USD 5 trillion, making it a desirable market for international investors. 

Inbound cross-border M&A is predicted to grow at the fastest rate in technology in 2024. Global and domestic players must conform to legal and regulatory changes and historical precedents in India when structuring M&A transactions with Indian entities to guarantee that their transactions proceed without interference from authorities.